Hara Partners

E-Commerce is a Loser in When Raising the Minimum Wage

The worries over minimum wage increases have e-commerce companies cringing. There has been research done which says the increase in wages won’t hurt the industry. Since e-commerce has a lower labor cost, around 20%, these companies thought they could escape having to spend a lot more money. Also e-commerce companies are very small and bare bones, so it should hurt over all cost. This thought stopped much of the worry. However, this thought was wrong, now that areas are starting to apply the minimum wage increase to work. Now that the initial research was wrong, the next question is how could they have been so wrong?

The Research in E-Commerce Forget

The research in the e-commerce industry had forgotten was the internet and the sales industry. The younger generations such as Millennials and Generation Y are changing the retail industry. They no longer go into stores and do not have a lot of money. These two aspects are shrinking the retail industry. The industry is already shrinking due to online sales and may not be able to sustain its workers. This is forcing retailers to raise prices, which will hurt the e-commerce industry.

According to Forbes, the internet is losing retail stores a lot of business. Allen Questrom, an expert in these industries says,

“Retailers are in an existential bind: The Internet is for the most part, a money-losing business, but stores have no choice but to be in it, Questrom said Merchants are diverting capital from a moneymaking business [brick-and-mortar stores], and dumping big dollars into their money-losing online and mobile businesses, he said. A recent study from HRC advisory supports that notion, revealing that e-commerce, including the steep costs of fulfilling online orders, is chipping away at retail profit margins.”

It seems since the internet these giant stores and industries have been in decline. Now they are in a strange place and the future isn’t looking good.